Netflix Has A $400M Problem: Password Sharing

Netflix might be gaining customers and making money hand over fist, but that doesn’t mean that the streaming giant isn’t without its problems. A Reuters/Ipsos poll has found that Netflix and other cable cutting services are losing money each year due to password sharing, possibly to the tune of hundreds of millions of dollars. The poll reveals that 21% of Netflix viewers between the ages of 18 and 24 admit to sharing their Netflix passwords or using another subscriber’s shared passwords, while 12% of older respondents answered that they do the same. The survey polled more than 4,400 US adults, 3,500 of whom regularly streamed video through cable cutting services like Netflix, Hulu, Amazon Prime, or HBO Now.

As Quartz has pointed out, the poll data has some serious financial ramifications for Netflix and other streaming sites. Given that 54% of US households now regularly watch Netflix and that there are 128 million households in the US, that means close to 70 million households regularly watch to Netflix. Even if just half of the 12% of the adults who share passwords were to sign up for Netflix’s cheapest subscription plan ($7.99 a month), that could bring in an extra $391 million for the big red streaming service.

It’s not just Netflix who is suffering from the effects of password sharing; the problem affects nearly every streaming service, and there isn’t much the industry can do about it without causing a lot of collateral damage for subscribers who travel regularly or split time between multiple households. Netflix chief financial officer David Wells said last year that Netflix “could crack down on it, but you wouldn’t suddenly turn all those folks to paid users.” While the problem is an expensive one, it isn’t one that’s easily fixed; password sharing seems for now to be an unfortunate loophole that streaming services can’t yet close without alienating customers.

Some in the streaming industry, however, feel that password sharing can be viewed as a way to lure in new users. Bernadette Aulestia, executive vice president of global distribution at HBO, says that password sharing among young adults sometimes helps the streaming service attract new audiences: “For us it’s more important that at that age where they are not financially independent quite yet, they are habituating to using the product to ultimately aspiring to becoming paid customers.” Yeah, once they crawl out from under the oppressive soul-crushing weight of student loan payments. Good luck, fellow millennials.

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Brett Tingley

Brett Tingley

Brett Tingley lives in beautiful western North Carolina. Aside from streaming television news, Brett covers all things strange, extraordinary, weird, and wonderful at MysteriousUniverse.org. When he's not glued to the keyboard, Brett can be found hiking throughout the Pisgah National Forest. Email him at brett@cutcabletoday.com or on Twitter at @brettbtingley.
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Brett Tingley